MF Regulation Violation: Axis AMC, former CEO Chandresh Nigam, others paid SEBI Rs 622.7 crore to resolve the case

Axis Asset Management Company (AMC), its trustee, former CEO Chandresh Kumar Nigam and three others settled with SEBI and SEBI, are accusing of surveillance of dealer activities, resulting in a positive run of Axis mutual fund transactions.

The settlement also includes former compliance officer Darshan Kapadia, former head of Equity Jinesh Gopani and former dealer of AMC Pawan Jhangiani, according to a SEBI order passed on Monday.

The entity paid in total ₹Rs 629 crore settled the alleged violation of mutual fund norms, and therefore, Sebi confirmed that “any lawsuit that may be filed against the violation… is resolved against the applicant”.

What is the charge?

In the application filed by the entity, they proposed that a settlement was proposed to resolve the so-called violations through a settlement order to resolve the so-called violations to resolve the so-called violations, thereby reaching a settlement.

The allegations focus on Axis AMC’s failure to adequately monitor dealer activity, which enabled former dealer Viresh Joshi to engage in leading deals. In addition, AMC has been accused of lacking appropriate systems to ensure compliance in transactions.

It is said that for some employees, including employees in other departments, there is no revocation of access to the trading room and there is unauthorized access during market time.

According to the order, most AXIS AMC’s active transactions are concentrated on Joshi, and in the absence of a dealer, AMC has temporary arrangements with equity research analysts or investment partners who can be assigned the role of backup dealerships.

Nevertheless, it was found that the dealer was still negotiating transactions with multiple brokers on behalf of mutual funds and connected entities, which allegedly undermined the integrity of the fund’s operations.

“As a result, the AMC’s alleged failure to monitor sufficient checks and balances for the transaction action, which led to the front run of the Axis Mutual Fund.”

In addition, AMC employees, including Gopani, have allegedly influenced the trading of securities through confidential information about the transactions of the Axis Mutual Fund.

In addition, Jhangiani was accused of using a mobile phone during market time, violating the AMC’s regulations on communications during trading hours.

When will the violation be discovered?

These violations were found after forensic examinations conducted by Alvarez & Marshal India, Deloitte Touche Tohmatsu India and BDO India LLP. The SEBI investigation also considered board comments from the AMC and the Trustee Committee, as well as the temporary party order issued by SEBI in February 2023.

Related to leading cases, SEBI had previously banned 21 entities, including Joshi, from participating in the securities market. These actions are part of the forward Axis Mutual Fund Trading Plan between September 2021 and March 2022.

After the SEBI order appeared on the leading order, Nigam, former CEO of Axis AMC, resigned from the company in March 2023.